{
    "type": "ETF",
    "ucits": true,
    "replication_method": "physical",
    "leverage": false,
    "derivatives": false,
    "swaps": true,
    "inverse": false,
    "complex_factors": [
        "Use of swaps and other derivatives for investment exposure",
        "Exposure to currency derivatives including forwards, futures, swaps, options",
        "Active management with discretion to deviate from benchmark",
        "Investment in below investment grade sovereign fixed income",
        "Potential counterparty risk from derivative counterparties"
    ],
    "classification": "complex",
    "supporting_data": "The First Trust FactorFX UCITS ETF is a UCITS-compliant ETF investing primarily in sovereign fixed income securities and currency-related financial derivative instruments including forward foreign exchange contracts, futures, swaps, and options. The KIID and PRIIPs KID explicitly mention the use of swaps and other derivatives as core to the investment strategy, not merely for risk management. The fund uses currency swaps and other derivatives with maturities mainly between one and three months to gain exposure to global currencies and related markets. The fund invests in below investment grade sovereign bonds and employs active management with discretion to invest in assets outside the benchmark or with different weightings. The monthly factsheet confirms the use of currency forwards and swaps as part of the portfolio construction, with significant net foreign currency exposure and derivative positions. The risk profile is medium-low (3/7), but the presence of derivative instruments, swap usage, and exposure to complex currency and fixed income instruments introduces complexity under MiFID II. There is no leverage or inverse exposure, but the synthetic elements via swaps and derivative counterparty risk are key complexity drivers. The PRIIPs KID does not carry a specific comprehension warning but highlights the need for specific knowledge and experience, consistent with complexity. The fund does not use capital protection or structured features. Costs are straightforward with no performance fees but include transaction costs related to derivatives. Overall, the use of swaps and derivatives as an inherent part of the investment strategy, combined with exposure to complex currency and fixed income instruments, leads to classification as a complex financial instrument under MiFID II."
}